BHP digs up £20bn bid for US aluminium major

BHP Billiton, the world's largest mining company, is lining up a £20bn bid for American aluminium producer Alcoa, viewed by analysts as a sitting duck after its bid for rival Alcan was trumped by Rio Tinto, the UK metals multinational led by Tom Albanese. Sources say BHP Billiton has told its advisers, Merrill Lynch and JP Morgan, to examine the merits of a bid and to report to Chip Goodyear, chief executive, in the next fortnight. Goodyear is due to hand over to Marius Kloppers in October but both men are said to be keen to pursue Alcoa and have the support of BHP's non executive directors. The mining world is being turned upside down by a spate of mergers that is being driven by soaring demand for commodities in places such as China, India and Brazil. Recently, London-listed Xstrata paid £8bn for Falconbridge, the Canadian copper and nickel group, and there have been a number of deals involving mining companies in Australia and Canada. Alain Belda, Alcoa's chief executive, last week called off his hostile bid for Canada's Alcan, a rival aluminium firm, after Rio delivered a knock-out £21bn all-cash offer. Belda put a brave face on defeat, telling analysts that the company had an independent future and would resume its suspended share buy-back programme. But observers say that Alcoa is now vulnerable and that a bid from BHP was 'highly probable'. Brazil's CVRD is also understood to have told its advisers to monitor developments, but is not planning to bid at this stage. Alcoa has a large downstream operation that includes the Reynolds and Baco aluminium foil brands, and packaging businesses. But these are expected to be sold on by BHP to private equity firms following a merger.